Fixed Price Contract Canceled By Client

ed_galligan · ‎05-20-2021

Hi All,

This is my first fixed-price project. We entered into a contract and I entered 2 milestones.

1) Initial Consultation and 2) SQLite / Jupyter project

We entered into a contract and the client paid milestone 1. The remaining scope was under milestone 2. The subject of the job referenced completion during the weekend, but I didn't start until Sunday. I asked for an extension in the messages section and the client granted it. A new drop-dead date was never communicated.

I've been working diligently and providing status to the client, but not receiving feedback. I requested clarification on an item Tuesday, but the client never responded. Yesterday, I informed the client that I'd begin forwarding information to him for review, within 2 hours he canceled the contract.

Interestingly, there were 2 hires on the job posting. I'm wondering if the client intended to pay the first person to complete and cancel the other person's contract??

I asked the client why they canceled and received the response below:

Another freelancer has completed this project for me within the deadline that you missed, thanks.

The client hired 2 people at a fixed price with the intention of only paying one.

This seems like a clear cut freelancer award if it went to dispute.

Would the community agree?

I'm 80% complete and wondering if I should just refund escrow for 2nd milestone and initial first milestone payment paid to prevent negative feedback (1st contract job) or if I should enter into dispute?

Milestone 1 was - $20

Milestone 2 = $180 ; currently in Escrow; client requesting refund

Total $200

Appreciate any thoughts.

Many Thanks,

Ed

gilbert-phyllis · ‎05-20-2021

You have nothing to dispute. A client can cancel a contract at any time. Any funds remaining in escrow are refunded to the client unless FL and client mutually agree otherwise, e.g. partial payment to cover the work FL has completed, assuming that work product is something the client can use and will accept.

A lot of people will not accept fixed-price contracts because of this contingency. It's kind of stinky on the client's part IMO but it is not a ToS violation.

Successful freelancing has a lot of moving parts. Most FLs who prosper on this platform will tell you no factor is more important than the choices you make about which clients and projects to accept. Getting started is an uphill slog but until you build a solid JSS, you need to be more selective than you'll ever be again about clients and projects. It's a long game.

ETA: This is not to say fixed-price contracts are to be avoided at all costs. I do them all the time. But there is craft and strategy involved in setting up milestones to limit your exposure until you know and trust a client.

prestonhunter · ‎05-20-2021

re: "I'm in a quandary since I'm now about 80% complete and wondering if I should just refund escrow and initial milestone payment to prevent negative feedback (1st contract job) or if I should enter into dispute since I'm 80% done?"

As Phyllis said: There is nothing to dispute.

If the first milestone was funded and released to you, but the second milestone was never funded, then this is over. No way to dispute.

As for feedback:
No, you should not refund.

You don't know that the feedback will be negative.

There is certainly no reason to refund without even seeing the feedback first.

If you really want to refund, submit your feedback, and then look at the feedback the client gave to you. If the feedback is fine, then there's no reason at all to send the client a refund.

ed_galligan · ‎05-20-2021

The money for the second milestone is in escrow. Client is requesting refund.

The client hired two people. Planned to pay whoever completed first and not pay the second which is me. Now the client is requesting a cancel/refund??

This doesn’t seem appropriate?

Thanks,
Ed

prestonhunter · ‎05-20-2021

re: "The money for the second milestone is in escrow. Client is requesting refund."

Ah... That is a very different situation.

That money was put into escrow, intended to be released to YOU.

The client can not do ANYTHING to unilaterally just click a button and get that money back.

The client can't get the money back unless you approve the refund.

If the client ALREADY closed the contract, then the client has ALREADY left feedback. You can not do anything "nice" to make the feedback better. It's already in place.

I see no reason to agree to a refund.

re: "The client hired two people. Planned to pay whoever completed first and not pay the second which is me. Now the client is requesting a cancel/refund??"

I OFTEN hire multiple people to work on the same task. I did that today. I hired three artists to create one illustration. And I hired three other artists to create another illustration. I can only use one of each illustration. So I will be picking what I like best and not using the rest. But everybody who works will get paid. All artists were hired using their posted hourly rate. I will pay more in the end than I could have by hiring fewer people, but I will have more choices and I will have the work done sooner.

Of course a client can't hire multiple people and only pay one of them if all of them work.

That is preposterous behavior.

ed_galligan · ‎05-20-2021

Thanks so much for the feedback. This is very helpful.

I'm 80% complete and stopped work when I saw the contract canceled. Should I complete the job and submit documentation, although the client doesn't need it at this point to ensure I completed my end of the bargain?

The only reason I was considering a refund was my rating. If it's a bad review, can I still refund and cancel the contract? I guess the question goes for post dispute resolution as well.

Thanks again!

gilbert-phyllis · ‎05-20-2021

Ed G wrote:
The money for the second milestone is in escrow. Client is requesting refund.

The client hired two people. Planned to pay whoever completed first and not pay the second which is me. Now the client is requesting a cancel/refund??

This doesn’t seem appropriate?

Thanks,
Ed

It's not the slightest bit appropriate but that's irrelevant. There are ways to game the system and this is one.

Question: Had you submitted work and requested payment against the second milestone before the client closed the contract? My previous comment was based on the assumption that you had not -- that you had been working on it and were on the verge of submitting it but had not yet pulled the trigger. If that is the case, then I'm pretty sure the client gets the escrowed $180 back and it's the $20 paid for the first milestone that he wants refunded. I advise you to tell him to pound sand. He's not gonna pay the $291 arbitration fee to get back $20. (Will is likely correct htat UW wouldn't go for that anyway, since they'd have to pay $291, too. They'd probably give the client $20 "as a courtesy" and hope you'd both go away.)

If you actually submitted work against the second milestone, then you could try shaming the client into some partial payment. But he sounds pretty scummy and unshameable, so I doubt you'd get anything. Arbitration might award you a portion of the outstanding fee commensurate with the amount of work you completed and submitted but it would cost you $291 to get it. You might be better served to cut bait, take the lessons and move forward.

Also, if you're serious about getting traction here, don't take any more "projects" to participation in surveys. Most of the job posts recruiting survey participation promise 5-star feedback (in itself a ToS violation), so as completed "jobs" they don't enhance your profile.

petra_r · ‎05-20-2021

Phyllis G wrote:
My previous comment was based on the assumption that you had not -- that you had been working on it and were on the verge of submitting it but had not yet pulled the trigger. If that is the case, then I'm pretty sure the client gets the escrowed $180 back and it's the $20 paid for the first milestone that he wants refunded.

No, this is not correct. The money in escrow can be disputed whether the freelancer has submitted for payment or not. Once money is in escrow, the client can't get it back without the freelancer's consent (or non-action for 7 days when a return request is sent) or dispute/arbitration proceedings. Closing a contract before submission does not return escrow funds to the client.

jr-translation · ‎05-21-2021

I am trying to understand why you accepted a contract on the 16th that was due this very day.
When did the client send you the offer and why did you only start working on the due day? If I had an urgent job and my freelancer hasn't accepted the contract (= hasn't started to work on my urgent task) at a point that already makes it impossible the meet the deadline I would hire someone else.

The client probably forgot to cancel the offer when he hired someone else. Be greatful that you got the $20 and do not accept offers for jobs you have no intention to complete within a clearly communicated deadline.

ed_galligan · ‎05-21-2021

Jennifer,

The client's intentions were made clear when I asked why they canceled the contract.

**Edited for Community Guidelines**

I noticed another hire on the job when I accepted. It was a race from the beginning.

We agreed to change the due date since I didn't receive the contract until Sun. I was communicating with the client on the 2nd milestone several times a day. When I was ready to submit documentation for review, Wed, that's when they canceled. They likely know that if I submit, they're obligated and that's also likely when the 2nd freelancer completed work.

Thanks,

Ed

g_vasilevski · ‎05-21-2021

Hi Ed,

Please keep in mind that sharing private details publicly in the Community is not allowed. Thank you.

~ Goran

ed_galligan · ‎05-21-2021

My apologies, I shouldn't have published the specifics. I'll keep this in mind moving forward.

Best,

Ed

wlyonsatl · ‎05-21-2021

Ed G.,

What you describe in your original post (pre-editing by Upwork) is clearly fraudulent behavior by the client - engaging more than one freelancer and intending to pay only the first one to deliver the work.

We will likely never know whether Upwork takes any action to prevent this behavior in the future.

lysis10 · ‎05-21-2021

ahhh, good ol' "hire mulltiple freelancers and just pay whoever delivers first."

Dispute it, Upwork will pay out of pocket over it if you stick to "arbitration or all the money" and maybe Upwork will start removing posts that suggest this is a great idea if they have to pay out of pocket for it.

tlsanders · ‎05-21-2021

Jennifer R wrote:
I am trying to understand why you accepted a contract on the 16th that was due this very day.
When did the client send you the offer and why did you only start working on the due day? If I had an urgent job and my freelancer hasn't accepted the contract (= hasn't started to work on my urgent task) at a point that already makes it impossible the meet the deadline I would hire someone else.

The client probably forgot to cancel the offer when he hired someone else. Be greatful that you got the $20 and do not accept offers for jobs you have no intention to complete within a clearly communicated deadline.

I would normally agree with this, but it falls apart for me where the client agrees to an extension. If, as he claims, he canceled because another freelancer completed the job on time, why did he agree to an extension? And why did he not close the contract when that freelancer delivered instead of after additional days of work?

gilbert-phyllis · ‎05-21-2021

Petra R wrote:
Phyllis G wrote:
My previous comment was based on the assumption that you had not -- that you had been working on it and were on the verge of submitting it but had not yet pulled the trigger. If that is the case, then I'm pretty sure the client gets the escrowed $180 back and it's the $20 paid for the first milestone that he wants refunded.
No, this is not correct. The money in escrow can be disputed whether the freelancer has submitted for payment or not. Once money is in escrow, the client can't get it back without the freelancer's consent (or non-action for 7 days when a return request is sent) or dispute/arbitration proceedings. Closing a contract before submission does not return escrow funds to the client.

I stand corrected (happily, I might add, where ya been?). Then, I'd say 'nope' to the refund request and be prepared to concede 20%.

ed_galligan · ‎05-20-2021

Please see the updated message. The 2nd milestone was already in escrow, so I can dispute?

*********************

I asked the client why they canceled and received the response below:

Another freelancer has completed this project for me within the deadline that you missed, thanks.

***********************

The client hired 2 people at a fixed price with the intention of only paying one. Me and someone else. Client paid the first milestone and put escrow funds in for second. Now requesting refund?

I started work and a couple of days later he canceled based on someone else completing before me. I didn't know it was a race.

This seems like a clear-cut freelancer award if it went to dispute. Am I missing something? Although I'm concerned about the rating and appreciate the feedback given in that regard.

********************************

Many thanks for the help!

Ed

prestonhunter · ‎05-20-2021

Unfortunately for the client, there is no "deadline was missed" button in the Upwork user interface.

The money can't go back to the client unless you agree to refund it.

You can say no, and then the case goes to mediation.

During mediation, you can offer a compromise. You could offer to let the client have half of the money in escrow, for example. Upwork can only encourage you to compromise. Upwork won't make a decision.

If you can't come to a decision during mediation, then the next step is binding arbitration, which costs the freelancer, client and Upwork $291 each.

re: "This seems like a clear-cut freelancer award if it went to dispute. Am I missing something?"

During dispute, Upwork will not make a decision. So it does not matter if it is clear cut or not.

During arbitration? I don't know. The deadline could be a factor in the client's favor. Even if you are 100% assured of winning in arbitration (which you aren't), arbitration is something I recommend freelancers and clients avoid, because it will cost $291, which is non-refundable if you actually go through to the arbitration step.

shummas · ‎05-20-2021

Preston H wrote:
Unfortunately for the client, there is no "deadline was missed" button in the Upwork user interface.

The money can't go back to the client unless you agree to refund it.

You can say no, and then the case goes to mediation.

During mediation, you can offer a compromise. You could offer to let the client have half of the money in escrow, for example. Upwork can only encourage you to compromise. Upwork won't make a decision.

If you can't come to a decision during mediation, then the next step is binding arbitration, which costs the freelancer, client and Upwork $291 each.

re: "This seems like a clear-cut freelancer award if it went to dispute. Am I missing something?"

During dispute, Upwork will not make a decision. So it does not matter if it is clear cut or not.

During arbitration? I don't know. The deadline could be a factor in the client's favor. Even if you are 100% assured of winning in arbitration (which you aren't), arbitration is something I recommend freelancers and clients avoid, because it will cost $291, which is non-refundable if you actually go through to the arbitration step.

A well-thought-out response.

I'm kind of curious though since I've never been in such a puzzling situation before.

Let's suppose both sides fail to reach a compromise, and yet both refuse to proceed with binding arbitration as well (since it's going to cost $291 each, an amount that is possibly bigger than the money in escrow anyway).

What next?

wlyonsatl · ‎05-20-2021

Or Upwork may not allow such a small project to go to arbitration.

It makes no economic sense for client or freelancer to pay $291 each to resolve such a small project, but that is ultimately their decision.

But Upwork certainly has no reason to agree to also pay its $291 share of the cost of arbitration on a project where Upwork's fees would be well under that amount.

(See Ciprian M.'s note that "The (Upwork) mediator insisted that a third-party arbitration is no need to go forward in my case because is time-consuming and costs money." https://community.upwork.com/t5/Freelancers/What-are-my-chances-of-winning-a-third-party-arbitration...

Always formally submit miletone work you expect to be paid for by using the project's "Submit" button, not via email or as an attachment in the Upwork message board. If I understand correctly, a client can cancel a project but that only effects the milestones you haven’t made submissions for. (You shouldn't submit work on unfunded milestones.) What’s left of the milestones on which work has not been submitted is all that’s affected by cancellation; (s)he can't just unilaterally cancel a funded milestone that you have already submitted work on.

Good luck!

wlyonsatl · ‎05-21-2021

If I were an Upwork shareholder I would ask management why they don't just get out of the mediation business on tiny projects.

Upwork has a very difficult business model trying to serve two different customer types whose interests are in some ways completely opposite from one another. Management has made it clear it wants to move up-market for more higher value projects, which I expect would mean fewer shenanigans - and fewer disputes - from both the relevant clients and freelancers.

Let clients and freelancers on tiny projects work out their differences on their own. But equal the playing field by providing the equivalent of a Job Success Score for clients (including how often each client has disputed payments, how often they have cancelled previous projects before completion, etc.), so a freelancer knows what they're getting into when making a proposal on a project. If the freelancer still decides to engage with a client, they will know they are on their own if there are payment disputes.

And whether such a change is made or not (likely not), make it crystal clear to freelancers and clients alike that arbitration is only available on projects exceeding a certain value.

https://support.upwork.com/hc/en-us/articles/211068528-Dispute-Non-Release-of-a-Milestone-Payment

I doubt that tiny projects are addressed by the following page's statement that "Freelancer and Client each has the right to demand Arbitration of a Fixed-Price Contract if the Fixed-Price Escrow associated with the Fixed-Price Contract has been funded at least once."

https://www.upwork.com/legal#fp

If anyone has actually utilized Upwork's arbitration process on a project whose total client payments were less than $1,000, I hope they will post the details here.

lysis10 · ‎05-21-2021

I've used arbitration. What do you want to know? It's like online court. Took like a month because the client would take the full 3 days to answer. I'd spend an hour every morning formulating my responses. It's a pain if you can avoid it.

I'm so glad I don't deal with any of this escrow crap anymore. My god things are so much less stressful with Tracker.

wlyonsatl · ‎05-21-2021

How large was the disputed payment being arbitrated, Jennifer?

lysis10 · ‎05-21-2021

Will L wrote:
How large was the disputed payment being arbitrated, Jennifer?

$850 IIRC. This guy was a real piece of work too. On Elance, you could see serial cancellers and he would escrow $100 for an outline and then try to get out of escrowing anything more until you did the work. He would request a refund from the $100 if he decided not to go with your outline. One of his complaints was actually that I "tricked" him into escrowing the whole amount when I told him he had to escrow before I would work. The whole song and dance took from August to end of February the following year. I didn't look back in his history enough to see that this is just what he does.

I ran into him on Upwork marketplace just recently. You can't see cancelled $0 contracts on Upwork so he looks like a great client on Upwork. I enjoyed winning arbitration and taking his money 😄

wlyonsatl · ‎05-21-2021

I once had a fixed price client who went through the charade of creating multiple agreed milestones and then, once the contract was in place, informed me that he didn't want to pay me until the last of the milestones was completed.

That didn't work out the way he had hoped it would and a deep dive into his long history on the platform showed many project cancellations (maybe half of his total projects listed). I guess the freelancers on the other half agreed to his terms.

As long as some freelancers will put up with bad client behavior, the rest of us will have to deal with it. Upwork does not make that easy, if you believe an ounce of prevention (avoiding dishonest clients in the first place) is worth a pound of cure (having to go through the uncertain result of mediation and, in a few cases, arbitration).

lysis10 · ‎05-21-2021

Will L wrote:
I once had a fixed price client who went through the charade of creating multiple agreed milestones and then, once the contract was in place, informed me that he didn't want to pay me until the last of the milestones was completed.

That didn't work out the way he had hoped it would and a deep dive into his long history on the platform showed many project cancellations (maybe half of his total projects listed). I guess the freelancers on the other half agreed to his terms.

As long as some freelancers will put up with bad client behavior, the rest of us will have to deal with it. Upwork does not make that easy, if you believe an ounce of prevention (avoiding dishonest clients in the first place) is worth a pound of cure (having to go through the uncertain result of mediation and, in a few cases, arbitration).

From what I could tell from my experience, I was the first freelancer to take this guy to arbitration. Most freelancers just give the refund and have no spine. I realize some people like escrow and can make a higher hourly rate than Tracker users, but I've eliminate so many problems by sticking to hourly. Also, the farmers won't do hourly so I can eliminate them too.